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Cows graze near a well pad on a family-run beef and dairy farm in Somerset County.
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Pa. court redefines some fracking as trespassing

Julia Rendleman/Post-Gazette

Pa. court redefines some fracking as trespassing

For more than a century, Pennsylvania law has allowed drilling companies to sink a well and then drain oil and gas from a neighboring property without paying the neighbor.

As early as the 1870s, Pennsylvania courts described oil’s “fugitive and wandering existence” and established the legal idea that oil and gas in an underground reservoir belongs to whoever grabs it from his own land first.

But a Pennsylvania appeals court upended that idea this week when it said that the legal theory known as the “rule of capture” does not apply to hydraulic fracturing in tight rock formations, like the Marcellus Shale, where gas doesn’t flow freely or generally escape without great effort.

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The fractures that are created when high pressure fluid and sand are forced down a well can stretch as far as 3,000 feet from a well bore through the rock.

When those fractures cross boundaries and draw gas from under a neighboring property, it amounts to a form of trespass — even when a well bore itself does not cross under neighboring land, the state Superior Court decided earlier this week.

The decision is a departure from the common understanding that the rule of capture applies to the modern shale drilling era just as it did during decades of conventional oil and gas development.

Ross Pifer, a Penn State University law professor, said the ruling is flawed but if it stands, “It could have a big impact.” That impact could be both in increasing the negotiating power of small landowners for gas leases and in influencing how far away from property lines companies decide to drill wells.

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The rule of capture in the U.S. had its origins in fox hunting and courts have adopted the language of wild creatures to describe the idea ever since.

In 1907, the Pennsylvania Supreme Court said that when a driller puts a well right next to a property line, his neighbor’s only remedy is to drill his own well. “He must protect his own oil and gas,” the court wrote. “He knows it is wild and will run away if it finds an opening and it is his business to keep it at home.”

The concept even had its pop culture moment in the 2007 film, “There Will Be Blood,” when the ruthless prospector played by Daniel Day-Lewis reveals that he has drained the oil from under his rival’s property from wells on surrounding land.

“I drink your milkshake,” he says, and then makes an obnoxious sucking sound.

Fracking is different, the Superior Court concluded, because oil and gas in shale formations doesn’t “migrate freely” as it does in conventional reservoirs.

Remarkably, the Superior Court found just two relevant cases from the shale era to draw from: a 2008 Texas case that upheld the rule of capture for hydraulic fracturing and a 2013 federal case out of West Virginia that rejected it.

The West Virginia decision — which found that applying the rule of capture to hydraulic fracturing “gives oil and gas operators a blank check to steal from the small landowner” — was vacated after the parties settled. But the Pennsylvania Superior Court found it compelling.

The federal district court described how company land agents use the rule to pressure landowners during lease negotiations: “The companies may tell a small landowner that either they sign a lease on the company’s terms or the company will just hydraulically fracture under the property and take the oil and gas without compensation.”

Another option under the rule, the federal court wrote, is that “a company may just take the gas without even contacting a small landowner.”

A Susquehanna County case

In the current case — which was brought against Southwestern Energy Production Co. by the Briggs family in Susquehanna County — the Superior Court did not rule on whether Southwestern actually trespassed under the 11-acre Briggs property. It sent the case back to the Susquehanna County Court of Common Pleas to determine the facts.

The decision could also be appealed to the state Supreme Court.

Mr. Pifer said two crucial flaws make it difficult to discern a precise standard in the Superior Court’s decision.

One is that the court draws a firm distinction between hydraulic fracturing and conventional gas drilling, when in fact nearly every well in Pennsylvania — both conventional and unconventional — is fracked.

The other flaw is that the court calls shale gas “non-migratory in nature,” but gas from the Marcellus Shale does naturally escape and gather in shallower rock formations over eons.

“It would be easier if they were more clear in terms of what exactly this applies to,” he said. Does it apply to unconventional shale wells or does it apply to all wells that use hydraulic fracturing, even those targeting conventional oil and gas reserves?

David Overstreet, an attorney who represents natural gas companies, said, “Potentially it is a very significant decision, depending on what happens next” but “there are layers of questions presented even if this particular ruling stands.”

“Until we have a conclusive ruling on the questions of Pennsylvania law that are embedded here, I think it is difficult to predict precisely where we’re going to wind up,” he said.

“The best thing we can do as counsel for the industry is just take a deep breath.”

Laura Legere: llegere@post-gazette.com.

First Published: April 5, 2018, 11:37 a.m.
Updated: April 5, 2018, 12:36 p.m.

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